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Two jobs, 403 b and sep Ira

Forum|Forum|4 years ago
April 28, 2022
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If myW2 job has a 403b and my employee and employer contributions are $58,000 (max) for 2021 can I still contribute to a Sep-IRA for 2021 if I have a side gig consulting solo employee job too (1099 payments)? I keep getting different answers from different accountants since 403 b is different under IRS tax code than a 401 K. Today I was told I could contribute to a Sep-IRA.

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Best answer by dmertz

No, you are not permitted to contribute to a SEP IRA. With respect to a 403(b) you are considered self-employed and your retirement contributions are limited to $58,000 with respect to all of your self-employment income. You've already reached that limit with the contributions to the 403(b).

This is different than the case where the W-2 employer's plan is instead a 401(k). Contributions to a 401(k) in that case are not considered to be self-employed retirement contributions, so if this was instead a 401(k), you could make a SEP contribution even if the contributions to the 401(k) totaled $58,000.

It's not surprising that you have gotten different answers because it's easy to forget the special provision in the tax code (CFR 1.415(f)-1(f)(1)) that makes the 403(b) contributions be treated as contributions made by you as self-employed, Since both the contributions to the 403(b) and the SEP would both be treated as being made by you as self-employed, the combined amount is subject to a single $58,000 limit.

D

dmertzAnswer

Employee

No, you are not permitted to contribute to a SEP IRA. With respect to a 403(b) you are considered self-employed and your retirement contributions are limited to $58,000 with respect to all of your self-employment income. You've already reached that limit with the contributions to the 403(b).

This is different than the case where the W-2 employer's plan is instead a 401(k). Contributions to a 401(k) in that case are not considered to be self-employed retirement contributions, so if this was instead a 401(k), you could make a SEP contribution even if the contributions to the 401(k) totaled $58,000.

It's not surprising that you have gotten different answers because it's easy to forget the special provision in the tax code (CFR 1.415(f)-1(f)(1)) that makes the 403(b) contributions be treated as contributions made by you as self-employed, Since both the contributions to the 403(b) and the SEP would both be treated as being made by you as self-employed, the combined amount is subject to a single $58,000 limit.

M

mas1998Author

Thank you for answering this question because I was told multiple times a Sep-IRA was different but clearly it is not.

again thanks

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dmertz

Employee

A SEP-IRA is certainly different, but because both would be treated to be plans under the same employer (you as self-employed), the $58,000 per-employer limit applies. Also, because you are considered to be self-employed for the purpose of the 403(b), you are not permitted to have a separate SEP plan that is based on Form 5305-SEP for the plan agreement. Any SEP plan would have to be based on some other prototype SEP agreement, but the $58,000 limit on the combined contributions would still apply.